Corporate social responsibility in need of improvement: Survey

This article was written by Allen Hsu and published by the Taiwan Journal on May 26, 2006. It reports that traditionally, the most fundamental goal of corporations has been to maximize profits for their shareholders. However, in recent years, increasing importance has been given to the need for corporations to take into consideration the interests of employees, consumers, business partners, the community, and the environment.

Indeed, in many developed countries there has been a trend to assume such corporate social responsibility (CSR). In recent years, this trend has also become an ethical and practical imperative for social and economic progress in Taiwan.

According to the World Business Council for Sustainable Development, corporate social responsibility "is the commitment of business to contribute to sustainable economic development, working with employees, their families, the local community and society at large to improve their quality of life". Specifically, because transnational corporations proliferate and expand according to the process of globalization and the growth of market economies, they are expected to be more proactive in promoting social responsibility, rather than passively reacting to governmental regulation and the pressure of non-governmental organizations. The mainstream view in the West is that corporations should not regard social responsibility as a source of onerous new costs. Instead, adopting a clear strategy in corporate social responsibility and investing in its implementation will strengthen the competitiveness of corporations by enhancing their public images and overall sustainability.

In May 2006, Taiwan's Chinese-language business magazine Global Views Monthly released the results of its second annual Global Views CSR Survey. A total of 686 enterprises listed on the Taiwan Stock Exchanged were surveyed, with 312 valid responses. While the overall return rate was 45.5 percent, the rate for the top 200 enterprises was 68 percent.

The survey evaluated the performance of enterprises with regard to social, environmental and financial-transparency issues. It measured the performance of enterprises in seven categories, which include corporate-society policies and overall management system; financial management and transparency; environmental policy, fair competition; employer-employee relations and employee welfare; involvement in society; and consumer rights. Meanwhile, the survey divided its respondents into high-tech manufacturing, traditional manufacturing, service and financial sectors. Companies in the high-tech sector were further divided into groups A and B, depending on whether their 2005 revenues exceeded or were lower than US$3 billion.

The 312 responding enterprises in the survey received an overall average CSR score of 68.2 out of 100 points. This score represented a considerable improvement from the average of 58.2 points in 2005. Such improvement seemed to indicate that local companies are becoming more active in promoting responsible management. For example, 27.6 percent of the respondents published reports on their CSR-related activities in 2005, compared to only 9.4 percent in 2004. This included 11.4 percent of respondents that published environmental responsibility reports and 8.8 percent that published more comprehensive CSR reports.

Specifically, companies in high-tech group A had the highest overall average CSR score of 87.7, as well as the highest average scores in each of the seven aforementioned categories. Among all the sectors, the most dismal performance was in the category of social involvement, with an overall average score of only 27.6 point. In this category, companies in high-tech group A had a score of 65.7, considerably higher than the second-place financial sector and far better than the score of 20.5 received by companies in high-tech group B's last place.

According to this article, the dramatic differences between the two high-tech groups comes as something of a surprise, given the aura of progressiveness that is often attached to the expression "high-tech". As a matter of fact, the average score of companies in high-tech group B for the aforementioned seven categories was second-worst, at 68.0. This is perhaps an indication that hungry, capital-intensive ventures, which have not yet made it big, tend to have a weak social conscious. Companies in high-tech group B also came in last in the category of corporate-society policies and general management system, with a score of only 48.6.

On the other hand, in the same category of corporate-society policies and general management system, companies in all sectors scored relatively low, between 50 and 70 points. The only exception was companies in high-tech group A, with a score of 82.8. Meanwhile, in the category of environmental protection, the highest score was only 71.4, received by companies in high-tech group A. They were followed by those in high-tech group B, with a score of only 57.0 points.

With all these results, the Global Views Monthly magazine selected 12 out of the 29 highest-scoring companies and presented them with grand awards and role model awards. The grand award in high-tech group A went to Taiwan Semiconductor Manufacturing Company Ltd., which commands 50 percent of the global market for contract chip manufacturing. The company has hired various experts to strengthen its corporate governance and information transparency. It has also established an audit committee.

One of the role model awards in high-tech group A went to AU Optronics Corp., the world's third-largest producer of large liquid-crystal displays. The company has had considerable investment in employee education programs. Another role model award went to Lite-On Technology Corp., a manufacturer of 3C products. The company has established the Lite-on Cultural Foundation, which is devoted to promoting community education.

The grand award in high-tech group B went to Delta Electronics Inc., the world's no.1 maker of power supplies and leading provider of power management solutions. The company has established a "green factory" and contributed to the development of more environment-friendly products. The two role model awards went to Advantech Co., Ltd, an e-platform service provider, and to Wah Lee Industrial Corp., a company that produces key materials and equipment required in manufacturing composite materials, engineering plastics, semiconductors and optoelectronic components.

The traditional manufacturing sector got a lower-than-average score in every one of the survey's seven categories, except that of environmental protection, in which the sector's score was slightly higher than the disappointing overall average of 56.0 points. For the second year in a row, China Motor Corp. won the grand award in this sector. Winners of the role model awards were Yulon-Nissan Motor Co. Ltd., an independent company that split away from Yulon Motor Co. Ltd., and Uni-President Enterprises Corp., which has grown from a food manufacturer to a multifaceted conglomerate comprising over 100 subsidiaries.

Companies in the service sector received a respectable average score in the consumer's rights category, at 88.0, which is significantly higher than the average for all sectors of 76.1. Interestingly, companies in high-tech group A received a perfect score of 100 in this category, mainly because product quality is the necessary requirement. Indeed, zero-defect production is the rule among reputable large-scale semiconductor, optoelectronic and computer companies worldwide. In contrast, companies in the service sector generally find it hard to objectively quantify customer satisfaction. Neither is it easy for companies to achieve 100 percent customer satisfaction in service industries.

Nonetheless, in the service sector, the grand award went to President Chain Store Corp., the franchiser of Taiwan's 7-Eleven chain of convenience stores. The role model awards went to Sinyi Real Estate Inc., which has been in business since 1981, and China Airlines, which flies to 50 cities around the world.

Companies in the finance sector received a good average score of 85.7 in the financial management and transparency category, after the 96.1 points received by companies in high-tech group A. On the other hand, because the survey listed the problems faced by Taiwan's banks in the unsecured loan business as a weakness in general management, the financial sector received an embarrassing score of 62.2 in this category. This was higher than the all-sector average score in the general management category, which was 53.7.

In the financial sector, the grand award went to E. Sun Financial Holding Co. Ltd. There was no role model award winner in this sector.

According to the Global Views Monthly magazine, there is plenty of room for improvement by Taiwan's companies, particularly in the category of involvement in society. In general, companies in Taiwan do not have a systematic plan for contributing to society.

While it is easy to donate money, it takes a lot of time and effort to get genuinely involved in society. Another area that needs much improvement is the welfare of female employees. Apparently, female employees in Taiwan's companies do not enjoy enough rights when compared to their counterparts in the European Union.

As aforementioned, the concept of corporate social responsibility (CSR) is strongly emphasized in progressive countries. For example, almost all of Sweden's large and medium-sized enterprises have a CSR department or manager, as compared with only 19.4 percent of the 312 companies included in the survey in Taiwan. The rate is no doubt even lower among other Taiwanese businesses.

According to the World Business Council for Sustainable Development, there is still insufficient emphasis on corporate social responsibility among Taiwan's companies. For instance, nearly 20 Chinese companies have joined in the U.N. Global Compact, which aims at promoting responsible corporate citizenship, but so far no Taiwanese company has ever done so. It is hoped that responsible enterprises will not only fulfill the material needs of life, but will also uplift human society by repaying their debts to the human communities and natural environments that support them. Indeed, this is the necessary spirit of social responsibility.